Global Multicountry model

The Global Multicountry model (GM) has been designed in 2014 to complement the model QUEST to support the EC in its macroeconomic forecasting and monitoring tasks. It has been jointly developed by the JRC and the Directorate-General for Economic and Financial Affairs.

GM belongs to the class of New-Keynesian Dynamic Stochastic General Equilibrium (DSGE) models that are widely used by international institutions and central banks. These models have rigorous microeconomic foundations derived from utility and profit optimisation and include frictions in goods, labour and financial markets.

The GM model has been developed to flexibly allow for different country configurations.

The GM model is suitable for policy scenarios. It is aimed to support the EC in its macroeconomic foreasting and monitoring tasks, and is regularly used to contribute to the Spring and Autumn rounds of the European Economic Forecasts by identifying the drivers of historical and forecasted key variables like GDP, inflation, trade balance.

GM belongs to the class of New-Keynesian Dynamic Stochastic General Equilibrium (DSGE) models that are widely used by international institutions and central banks. These models have rigorous microeconomic foundations derived from utility and profit optimisation and include frictions in goods, labour and financial markets.

The GM model has been estimated with a flexible geographical configuration which encompasses multiple region economies linked by financial and trade linkages.  The versions estimated with full-information Bayesian techniques include the GM2-EA (euro area - EA - and Rest-of-the-world -RoW), the GM2-EU (European Union and RoW), the GM3-US (EA, the United States and RoW) and the countries specific versions, namely, GM3-DE, GM3-FR, GM3-IT, GM3-ES and GM3-PL, where the detailed country economy is studied together with the detailed Rest-of-the-euro area (EA for Poland) and the RoW. 

The GM model has been designed in order to complement QUEST to support the EC in its macroeconomic surveillance, monitoring and forecasting tasks. While the QUEST versions have a larger degree of complexity (e.g. featuring housing and credit-constrained households, financial cross-holdings), versions of GM are kept a lower level of complexity in order to reduce the computational burden, being intended to be regularly re-estimated for all the different country configurations.

The estimated versions of the GM model are regularly used in the context of Economic forecasts [Spring/Autumn rounds] and in general to support the EC in its macroeconomic surveillance and monitoring tasks. 

• National account data (GDP and its components, current and constant prices)
• Labour market data (wages, employment)
• Financial variables (interest rates)
• Trade data
• Monetary data (interest rates)
• etc